INSPECTORS 

GENERAL

A Sample of the 

Treasury IG for Tax 

Administration's 

Audits Were

Generally Consistent 

with Standards, but 

Additional Review 

Could Address 

Exceptions

Report to the Chairman, Committee on 

Finance, U.S. Senate

May 2014

GAO-14-70

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-14-70, a report to the 

Chairman, Committee on Finance, U.S. 

Senate

May 2014

INSPECTORS GENERAL

A Sample of the Treasury IG for Tax Administration's 

Audits Were Generally Consistent with Standards, but 

Additional Review Could Address Exceptions

Why GAO Did This Study

Congressional committees and IRS 

rely on TIGTA’s work to help improve 

the government’s tax programs. GAO 

was asked to review the quality of 

audits issued by TIGTA. GAO’s 

objectives were to determine the extent 

that TIGTA’s (1) audit plans were 

consistent with CIGIE standards for 

planning and provided audit coverage 

of IRS and (2) audit policies and 

procedures were consistent with 

Government Auditing Standards, and a 

sample of audits were consistent with 

these standards and TIGTA’s policies.

To address these objectives, for fiscal 

year 2012, GAO compared TIGTA’s 

audit plans with CIGIE’s Quality 

Standards for Federal Offices of 

Inspector General and reviewed 

documentation related to TIGTA’s audit 

coverage. GAO also compared 

TIGTA’s policies with selected 

requirements of Government Auditing 

Standards and compared a random, 

nongeneralizable sample of 20 TIGTA 

audits to selected requirements of the 

standards and TIGTA’s policies.

What GAO Recommends

To help ensure audit conclusions are 

reported correctly and supported by 

sufficient evidence, GAO recommends 

that TIGTA develop and implement 

policies and procedures requiring a 

review of draft audit reports by 

individuals trained and qualified to 

assess the use of statistical and 

related data analyses.

In comments on a draft of this report, 

the TIGTA Inspector General agreed 

with GAO’s recommendation, but 

disagreed that specific TIGTA report 

conclusions were not fully supported.

GAO reaffirmed its findings.

What GAO Found

The Treasury Inspector General for Tax Administration’s (TIGTA) strategic audit 

plan for fiscal years 2009 through 2014 and annual audit plan for fiscal year 2012 

were consistent with the Council of the Inspectors General on Integrity and 

Efficiency’s (CIGIE) planning guidance, including consideration of risk and 

coordination. TIGTA’s plans included priorities related to risks; the concerns of 

stakeholders, including Internal Revenue Service (IRS) executives; coordination 

with GAO and the Congress; and consideration of the prevention and detection 

of fraud threats to IRS. GAO also determined that the 94 audit reports issued by 

TIGTA during fiscal year 2012 were either specifically identified in TIGTA’s fiscal 

year 2012 annual plan or were consistent with audit issues covered by the plan. 

In addition, TIGTA’s audits provided oversight of IRS’s major programs and 

activities, high-risk areas identified by GAO, and the agency’s management 

challenges as determined by TIGTA.

TIGTA’s audit policies and procedures are contained in its Operations Manual. 

GAO found that TIGTA’s audit policies and procedures were consistent with 

selected requirements of Government Auditing Standards. Also, GAO’s review of 

a random, nongeneralizable sample of 20 TIGTA audits completed in fiscal year 

2012 found that the audits were generally consistent with selected requirements 

of Government Auditing Standards and TIGTA’s policies and procedures, with 

the following exceptions.

 The audits GAO sampled were consistent with auditing standards for 

documented supervision, but not all of the audit documentation had 

documented supervisory review within 30 days of completion as required by 

TIGTA’s Operations Manual. Specifically, 9 of the 20 reports had a total of 86 

audit documents with supervisory review documented after the 30-day 

requirement. Exceptions to TIGTA’s policy on the timeliness of documented 

supervisory review of audit documentation had been previously identified by 

both TIGTA’s internal quality assurance reviews and the most recent peer 

review performed by another office of inspector general. TIGTA has taken 

steps to reinforce adherence to the audit documentation policy that if properly 

implemented should help to ensure timely documented supervisory review. 

 In two audit reports, specific statements were not fully supported by sufficient 

evidence. In one instance, TIGTA reported using a judgmental sample of IRS 

organizations, which cannot be projected to the population, as support for a 

conclusion about the relative ability of IRS organizations to implement best 

practices. In another instance, TIGTA did not have sufficient evidence in the 

report and audit documentation to support the reported potential for 

$21 billion in fraudulent tax refunds because of identity theft and the reported 

cost savings that could result from its audit recommendation.

TIGTA’s policies and procedures do not include a review of audit reports by staff 

members trained in the use of statistics and related data analyses. Such a review 

by qualified individuals would help to ensure that the conclusions are reported 

correctly and supported by sufficient evidence as specified by auditing standards.

View GAO-14-70. For more information, 

contact Beryl H. Davis at (202) 512-2623 or 

davisbh@gao.gov.
Page i GAO-14-70 TIGTA Audit Quality 

Letter 1

Background 3

TIGTA’s Planning Process Was Consistent with CIGIE Standards 

and Provided Audit Coverage of IRS 6

TIGTA’s Audit Policies and Sampled Reports Were Generally 

Consistent with Standards, but Additional Review Could 

Address Exceptions 14

Conclusions 23

Recommendation for Executive Action 23

Agency Comments and Our Evaluation 24

Appendix I Scope and Methodology 26

Appendix II Sample of 20 Audit Reports Issued by TIGTA in Fiscal Year 

2012 Selected for Review 28

Appendix III Comments from the Treasury Inspector General for Tax 

Administration 30

Appendix IV GAO Contact and Staff Acknowledgments 34

Figures

Figure 1: TIGTA Organization Chart 4

Figure 2: Fiscal Year 2012 Audit Reports Issued by TIGTA’s 

Business Units 8

Figure 3: Audit Coverage of Divisions and Offices Responsible for 

IRS’s Major Programs and Activities in Fiscal Year 2012 9

Figure 4: High-Risk Areas Addressed by TIGTA’s Fiscal Year 

2012 Audits 11

Figure 5: IRS’s Management Challenges Addressed by Fiscal 

Year 2012 Audits 13

Contents
Page ii GAO-14-70 TIGTA Audit Quality 

Abbreviations

CIGIE Council of the Inspectors General on Integrity and 

Efficiency

GSA General Services Administration

IG Inspector General

IRS Internal Revenue Service

OIG Office of the Inspector General

TIGTA Treasury Inspector General for Tax Administration

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Page 1 GAO-14-70 TIGTA Audit Quality 

441 G St. N.W.

Washington, DC 20548

May 16, 2014

The Honorable Ron Wyden

Chairman

Committee on Finance

United States Senate

Dear Mr. Chairman:

The Internal Revenue Service (IRS) administers the nation’s tax laws and 

collects the revenues that fund most of the federal government’s 

operations and public services. For fiscal year 2012, IRS collected over 

$2.5 trillion in tax revenue and reported processing more than 237 million 

tax returns. The Inspector General Act of 1978 (IG Act) created offices of 

inspectors general (IG) at major departments and agencies to prevent 

and detect fraud and abuse in their departments’ and agencies’ programs 

and operations; conduct and supervise independent audits and 

investigations; and recommend policies to promote economy, efficiency, 

and effectiveness.0F

1 The Treasury Inspector General for Tax 

Administration (TIGTA) was established by the Internal Revenue Service 

Restructuring and Reform Act of 1998, which amended the IG Act to 

include an independent IG to provide oversight of IRS’s activities, 

programs, and offices.1F

2 Congressional committees and IRS rely on 

TIGTA’s work to help make decisions to improve the effectiveness and 

efficiency of the government’s tax programs.

This report responds to your request that we review the quality of audits 

issued by TIGTA. Specifically, our objectives were to determine the extent 

to which TIGTA’s (1) audit planning process was consistent with quality 

standards2F

3 established by the Council of the Inspectors General on 

 

1Pub. L. No. 95-452, 92 Stat. 1101 (Oct. 12, 1978) (codified, as amended, at 5 U.S.C. 

App.).

2Pub. L. No. 105-206, 112 Stat. 685, 705 (July 22, 1998).

3Council of the Inspectors General on Integrity and Efficiency, Quality Standards for 

Federal Offices of Inspector General (Washington, D.C.: October 2003).
Page 2 GAO-14-70 TIGTA Audit Quality 

Integrity and Efficiency (CIGIE),3F

4 and whether the resulting audits 

addressed IRS’s major programs and activities, high-risk areas, and 

management challenges, and (2) audit policies and procedures were 

consistent with selected requirements of Government Auditing Standards, 

and whether a sample of TIGTA’s audits were consistent with selected 

requirements of Government Auditing Standards and TIGTA’s policies 

and procedures.4F

5

To review TIGTA’s audit planning process, we compared TIGTA’s 6-year 

strategic plan for fiscal years 2009 through 2014 and its fiscal year 2012 

annual plan with requirements of CIGIE’s quality standards for planning to 

determine if they were consistent. To determine the extent of TIGTA’s 

audit coverage, we compared the results of TIGTA’s fiscal year 2012 

audits with the divisions and offices responsible for IRS’s major programs 

and activities, high-risk areas, and management challenges. To 

determine whether TIGTA’s audit policies and procedures as provided in 

its Operations Manual5F

6 were consistent with requirements6F7

in 

Government Auditing Standards, we focused on those requirements that 

are most likely to have a direct bearing on the quality of the audit 

documentation used to support the findings, conclusions, and 

recommendations in audit reports, as well as requirements for 

 

4CIGIE was established by the Inspector General Reform Act of 2008 (Pub. L. No. 110-

409, 122 Stat. 4302, Oct. 14, 2008) and consists mainly of IGs to address integrity, 

economy, and effectiveness issues that transcend individual government agencies, and to 

increase the professionalism and effectiveness of personnel in the IG offices.

5GAO, Government Auditing Standards, July 2007 Revision, GAO-07-731G (Washington, 

D.C.: July 2007), was superseded by Government Auditing Standards, December 2011 

Revision, GAO-12-331G (Washington, D.C.: December 2011), for performance audits 

beginning on or after December 15, 2011. 

6Treasury Inspector General for Tax Administration, Operations Manual, Section 300 

(Washington, D.C.: updated through Oct. 1, 2012).

7When referring to Government Auditing Standards, this report uses “requirement” in a 

manner consistent with those standards. Government Auditing Standards has two 

categories of requirements. For “unconditional requirements,” auditors must comply in all 

cases where such requirement is relevant. For “presumptively mandatory requirements,”

auditors must comply except in certain rare circumstances under which auditors must 

document their justification for the departure and how alternative procedures were 

sufficient to achieve the intent of the requirement. See Government Auditing Standards, 

2.15 and 2.16. 
Page 3 GAO-14-70 TIGTA Audit Quality 

independence and quality control and assurance.7F

8

In addition, we 

reviewed a random, nongeneralizable sample of 20 audits from a total of 

94 audits issued by TIGTA’s four business units in its Office of Audit 

during fiscal year 2012 and their underlying documentation to identify 

support for the reported findings, conclusions, and recommendations, and 

determine whether the audits were consistent with selected requirements 

of Government Auditing Standards and TIGTA’s audit policies and 

procedures. For additional details on our scope and methodology, see 

appendix I.

We conducted this performance audit from January 2013 to May 2014 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

We obtained comments on a draft of this report from the TIGTA Inspector 

General, which are reprinted in appendix III. A summary of the Inspector 

General’s comments and our response are presented in the Agency 

Comments and Our Evaluation section of this report.

IRS completes its mission through four operating divisions: (1) Wage and 

Investment, (2) Large Business and International, (3) Small 

Business/Self-Employed, and (4) Tax Exempt and Government Entities. 

Additional offices provide IRS and taxpayer support, including the Office 

of Chief Counsel, the Taxpayer Advocate Service, Criminal Investigation, 

Appeals, and the Return Preparer Office. TIGTA is placed 

organizationally within the Department of the Treasury (Treasury) and 

reports directly to the Secretary of the Treasury, but functions 

independently from all other offices and bureaus of the department.

The IG Act requires that IG offices, including TIGTA, perform audits in 

compliance with Government Auditing Standards established by the 

 

8We selected requirements from Government Auditing Standards that address 

independence; quality control and assurance; audit planning; internal control; obtaining 

sufficient, appropriate evidence; data reliability; elements of a finding; documentation; 

reporting auditor’s compliance with auditing standards; and reporting views of responsible 

officials.

Background
Page 4 GAO-14-70 TIGTA Audit Quality 

Comptroller General. These standards provide a framework for 

performing high-quality audit work with competence, integrity, objectivity, 

and independence to provide accountability and to help improve 

government operations and services. In addition, the standards provide 

the foundation for government auditors to lead by example in the areas of 

independence, transparency, accountability, and quality through the audit 

process. Also, CIGIE’s Quality Standards for Offices of Inspector General

provides general standards for the IGs, including TIGTA, to follow for 

effective planning.

As illustrated in figure 1, TIGTA consists of the Office of the Inspector 

General (OIG) and the offices of Audit, Investigations, Inspections and 

Evaluations, Mission Support, and Information Technology; the Chief 

Counsel; and the IG’s Counselor. The Office of Audit includes four 

business units and a support unit for Management Planning and 

Workforce Development. The business units address audits of the 

corresponding IRS functions for tax-exempt organizations, information 

technology, compliance and enforcement operations, and returns 

processing and account services.

Figure 1: TIGTA Organization Chart
Page 5 GAO-14-70 TIGTA Audit Quality 

TIGTA’s policies and procedures include guidance on measuring the 

monetary accomplishments of audit reports through outcome measures, 

which are defined by the IG Act to include any savings amounts and 

additional measures of quantifiable impact defined by TIGTA. The IG Act 

requires IG offices, including TIGTA, to provide semiannual reports to the 

Congress on their activities. These reports include any potential savings 

amounts resulting from recommendations that funds be put to better use.8F

9

TIGTA’s policies encourage auditors to quantify the impact of reported 

issues and the magnitude of recommended corrective actions through 

outcome measures, including funds to be put to better use, that assess 

the impact or value that audits have on tax administration or business 

operations. According to TIGTA’s policies and procedures, outcome 

measures are to be quantifiable to the maximum extent possible, linked 

directly to the audit findings based on transaction or case analyses or 

statistical projections, and expressed in monetary or other measurable 

units.

In fiscal year 2012, TIGTA had total budgetary resources of 

approximately $155 million and full-time equivalent staff of 807. TIGTA 

reported having 271 audit staff on board at the end of fiscal year 2012 

with the remaining staff in investigative, administrative, and specialist 

positions. For fiscal year 2012, TIGTA issued 94 audit reports that 

reported approximately $22 billion in potential savings to the government 

based on the reports’ recommendations and about $584 million in 

additional quantifiable impact. About $21 billion, or approximately 95 

percent of TIGTA’s reported potential savings for fiscal year 2012, came 

from one report.9F

10 In fiscal years 2010 and 2011, TIGTA reported 

potential savings from audits of $2.8 billion and $7.4 billion, respectively.

 

9The IG Act defines “recommendation that funds be put to better use” as a 

recommendation that funds could be used more efficiently if management of an 

establishment took actions to implement and complete the recommendation. 5 U.S.C. § 

5(f)(4).

10Treasury Inspector General for Tax Administration, There Are Billions of Dollars in 

Undetected Tax Refund Fraud Resulting From Identity Theft, 2012-42-080 (Washington, 

D.C.: July 19, 2012).
Page 6 GAO-14-70 TIGTA Audit Quality 

TIGTA’s planning process was consistent with the general standards in 

CIGIE’s Quality Standards for Federal Offices of Inspector General, and 

provided audits that addressed IRS’s major programs and activities, highrisk areas, and management challenges. CIGIE’s quality standards serve 

as an overall quality framework for managing, operating, and conducting 

the work of the offices of inspectors general and include general 

standards on planning and coordinating their efforts. Specifically, the 

CIGIE standards include a planning system that assesses the nature, 

scope, and inherent risks of agency programs and operations and 

includes a methodology and process for identifying and prioritizing 

agency programs and operations as potential subjects for audit. In 

addition, the methodology should be designed to use the most effective 

combination of OIG resources, including previous OIG work and input 

from OIG staff. Also, the CIGIE standards state that through coordination, 

the OIG should consider the plans of other organizations both internal 

and external to the agency and develop a strategy to identify the causes 

of fraud, waste, abuse, and mismanagement.

We determined that TIGTA’s audit planning process was consistent 

with CIGIE’s standards based on its use of (1) risk assessments; 

(2) prioritization of audit subjects; (3) coordination with other 

organizations; and (4) attention to potential fraud, waste, and abuse. 

In addition, we determined that the 94 audit reports issued by TIGTA 

during fiscal year 2012 were either specifically identified in TIGTA’s 

fiscal year 2012 annual audit plan or were consistent with audit issues 

and areas covered by the plan.

To develop its 6-year strategic plan for fiscal years 2009 through 2014, 

TIGTA’s Office of Audit used a risk-assessment strategy within its core 

business units. TIGTA identified the major risks facing IRS, prioritized the 

risks, and included both risk-based and mandated audits in the strategic 

plan. TIGTA’s strategic plan is an overall guide that provides focus and 

contributes to the results of the annual planning process. For example, 

TIGTA’s annual audit plan for fiscal year 2012 was developed based on 

identified risks, stakeholder concerns, and follow-up reviews of previously 

audited areas with significant control weaknesses. To receive input for 

both the strategic and annual plans, TIGTA kept apprised of operating 

conditions and emerging issues through coordination throughout 

Treasury. To illustrate, staff in the Office of Audit maintained liaison and 

working contact with applicable IRS staff at the IRS Oversight Board, the 

TIGTA’s Planning 

Process Was 

Consistent with CIGIE 

Standards and 

Provided Audit 

Coverage of IRS

Consistency with CIGIE’s 

Quality Standards for 

Planning
Page 7 GAO-14-70 TIGTA Audit Quality 

National Taxpayer Advocate, and additional Treasury offices through 

meetings and electronic mail correspondence, which resulted in specific 

requests for audits.10F

11

TIGTA’s strategic plan and annual audit plan also included input from 

stakeholders external to Treasury. For example, TIGTA coordinates its 

audits with GAO and congressional staff and is a member of CIGIE, 

which considers issues common to all federal IGs. The Inspector General 

has also participated as a member of the Comptroller General’s Domestic 

Working Group, which considers oversight issues throughout the federal 

government.1F

12 As a result of input from IRS and Treasury officials and 

from external stakeholders, TIGTA’s strategic plan for fiscal years 2009 

through 2014, and its annual audit plan for fiscal year 2012, include new 

provisions established by health care reform legislation, the acceleration 

of globalization of tax issues, high-risk areas identified by GAO, and 

major management and performance challenges faced by IRS.

In addition, TIGTA’s strategic plan and the annual audit plan for fiscal 

year 2012 both included as priorities (1) the improvement of IRS 

operations by detecting and deterring fraud, waste, and abuse or 

misconduct by IRS employees and (2) the protection of IRS resources 

and employees from external threats to tax administration. Both the 

strategic and annual audit plan addressed issues associated with IRS 

operations, including the detection and investigation of fraud and 

electronic crime, such as phishing,12F

13 with the fraudulent use of the IRS 

name and symbols; procurement fraud; and taxpayer privacy violations.

 

11The IRS Oversight Board is an independent body charged to provide IRS with long-term 

guidance and direction. The board also seeks the views and insights of those who work 

regularly with IRS. The National Taxpayer Advocate is head of the Taxpayer Advocate 

Service, which is an independent organization within IRS established to help taxpayers 

resolve tax problems with IRS and recommend changes that will help prevent the 

problems.

12The Comptroller General’s Domestic Working Group was formed in 2001 to bring 

together federal inspectors general and state and local audit officials informally to discuss 

topics of mutual interest, address common concerns, and promote collaborative efforts.

13Phishing is a digital form of social engineering that uses authentic-looking, but fake, emails to request information from users or direct them to a fake website that requests 

information. 
Page 8 GAO-14-70 TIGTA Audit Quality 

We determined that for fiscal year 2012, TIGTA provided audit coverage 

of IRS’s major programs and activities, high-risk areas as reported by 

GAO, and management challenges as identified by TIGTA.

IRS program coverage. During fiscal year 2012, TIGTA’s Office of 

Audit provided audit coverage of the divisions and offices responsible for 

IRS’s major programs and activities through its four business units for 

(1) Returns Processing and Account Services, (2) Compliance and 

Enforcement Operations, (3) Management Services and Exempt 

Organizations, and (4) Security and Information Technology Services. 

Figure 2 illustrates the number of audit reports issued by each TIGTA 

business unit in fiscal year 2012.

Figure 2: Fiscal Year 2012 Audit Reports Issued by TIGTA’s Business Units

The audits completed by TIGTA’s business units addressed programs 

and activities in each major IRS division and office to a varying degree 

during fiscal year 2012, as shown in figure 3.

Audit Coverage of IRS
Page 9 GAO-14-70 TIGTA Audit Quality 

Figure 3: Audit Coverage of Divisions and Offices Responsible for IRS’s Major Programs and Activities in Fiscal Year 2012

Note: TIGTA issued a total of 94 audit reports in fiscal year 2012 that either addressed a single IRS 

division or office or several divisions and offices. Consequently, the total audits listed for coverage of 

IRS components is greater than 94.

For example, 29 audits addressed the Wage and Investment Division 

while 3 audits addressed issues affecting the Large Business and 

International Division. TIGTA officials stated that the relatively low number 

of audit reports that addressed the activities of the Large Business and 

International Division was due to the more complex nature of the audits 

and the additional time needed to complete the audit work. TIGTA 

provided a listing of additional audits of the Large Business and 
Page 10 GAO-14-70 TIGTA Audit Quality 

International Division that were ongoing during fiscal year 2012 but were 

completed in the next fiscal year.13F

14

High-risk coverage. TIGTA’s fiscal year 2012 audit reports provided 

oversight coverage of IRS’s high-risk areas identified by GAO. Since 

1990, we have periodically reported on government operations that we 

have designated as high risk because of their greater vulnerabilities to 

fraud, waste, abuse, and mismanagement as well as challenges to 

economy, efficiency, or effectiveness. In February 2011, we reported two 

high-risk areas that apply specifically to IRS and three additional high-risk 

areas that apply to IRS and other federal agencies and departments 

government-wide.14F

15 Specific to IRS, we reported that the enforcement of 

tax laws is vital to ensuring that all owed taxes are paid, which in turn can 

promote voluntary compliance by giving taxpayers confidence that others 

are paying their fair share. This high-risk area includes IRS’s efforts to 

ensure payment both of unpaid taxes known to IRS and unpaid taxes IRS 

has not detected. Another high-risk area specific to IRS during our review 

period was business systems modernization, which is a multibillion dollar 

highly complex effort that involves the development and delivery of a 

number of modernized tax administration and internal management 

systems, including financial management, as well as core infrastructure 

projects that are intended to replace the agency’s aging business and tax 

processing systems.15F

16

 

14Treasury Inspector General for Tax Administration, The Compliance Assurance Process 

Has Received Favorable Feedback, but Additional Analysis of Its Costs and Benefits Is 

Needed, 2013-30-021 (Washington, D.C.: Feb. 22, 2013).

Treasury Inspector General for Tax Administration, Assessment of the IRS’s Interpretation 

of Section 1302 of the Recovery Act: Qualifying Advanced Energy Project Credit, 2013-

40-059 (Washington, D.C.: Sept. 27, 2013).

Treasury Inspector General for Tax Administration, The Referral Process for Examinations

of Tax Returns Claiming the Foreign Earned Income Exclusion Needs to Be Improved, 

2013-30-112 (Washington, D.C.: Sept. 27, 2013).

Treasury Inspector General for Tax Administration, Systemic Penalties on Late-Filed 

Forms Related to Certain Foreign Corporations Were Properly Assessed, but the 

Abatement Process Needs Improvement, 2013-30-111 (Washington, D.C.: Sept. 25, 

2013).

Treasury Inspector General for Tax Administration, The International Campus Compliance 

Unit Is Improving Tax Compliance, 2013-30-113 (Washington, D.C.: Sept. 19, 2013).

15GAO, High-Risk Series: An Update, GAO-11-278 (Washington, D.C.: February 2011). 

16GAO removed IRS Business Systems Modernization from its most recent high-risk list

because of significant improvements. See GAO, High-Risk Series: An Update, 

GAO-13-283 (Washington, D.C.: February 2013).
Page 11 GAO-14-70 TIGTA Audit Quality 

Government-wide high-risk areas identified by GAO that also apply to IRS 

are (1) protecting the federal government’s information systems and the 

nation’s cyber critical infrastructure, (2) managing real property, and 

(3) strategic human capital management. Federal information security has 

been on the high-risk list since 1997, with cyber critical information 

protection added in 2003. Regarding real property, federal agencies 

continue to face long-standing problems, such as overreliance on leasing, 

excess and underutilized property, and issues related to protecting 

federal facilities. Strategic human capital management also remains a 

high-risk area because of a need to address current and emerging critical 

skills gaps that are undermining agencies’ abilities to meet their vital 

missions. As shown in figure 4, TIGTA’s fiscal year 2012 audits 

addressed these high-risk areas.

Figure 4: High-Risk Areas Addressed by TIGTA’s Fiscal Year 2012 Audits
Page 12 GAO-14-70 TIGTA Audit Quality 

Management challenges coverage. TIGTA’s fiscal year 2012 audit 

reports provided oversight coverage of major management challenges. 

The federal IGs began the identification of management challenges in 

1997 at the request of Members of the Congress, who asked the IGs to 

identify the most serious management problems within their respective 

agencies and departments. This began a yearly process that continues as 

a result of the Reports Consolidation Act of 2000.16F

17 The act requires 

executive agencies to include their IGs’ lists of significant management 

challenges in their annual performance and accountability reports to the 

President, the Office of Management and Budget, and the Congress. This 

information is reported by Treasury in its annual agency financial report, 

which includes IRS’s management challenges as identified by TIGTA.17F

18

A number of our high-risk areas are the same as, or similar to, the IRS 

management challenges identified by TIGTA for fiscal year 2012. These 

include the high-risk area of enforcement of tax laws, which is similar to 

the TIGTA-identified management challenges of tax compliance initiatives 

and fraudulent claims and improper payments. In addition, TIGTA ranked 

the security of taxpayer data as the top IRS management challenge and 

identified IRS’s business systems modernization as a management 

challenge, which are consistent with the high-risk areas of protecting 

government information and IRS business systems modernization. In 

addition, strategic human capital management is a high-risk area across 

the federal government and was identified by TIGTA as a management 

challenge at IRS. Additional management challenges identified by TIGTA 

that are not directly included as high-risk areas are (1) providing quality 

taxpayer service, (2) taxpayer protection and rights, (3) achieving 

efficiencies and cost savings, and (4) the globalization of the international 

financial system. Figure 5 shows the number of audits TIGTA provided for 

the management challenges it identified in fiscal year 2012.

 

17Pub. L. No. 106-531, 114 Stat. 2537 (Nov. 22, 2000).

18Department of the Treasury, The Department of the Treasury Agency Financial Report 

Fiscal Year 2012 (Washington, D.C.: Nov. 15, 2012).
Page 13 GAO-14-70 TIGTA Audit Quality 

Figure 5: IRS’s Management Challenges Addressed by Fiscal Year 2012 Audits

Note: TIGTA issued a total of 94 audit reports in fiscal year 2012 that either addressed a single 

management challenge or more than one management challenge. Consequently, the total audits 

listed for coverage of IRS’s management challenges is greater than 94.

All management challenges were addressed by TIGTA’s fiscal year 2012 

audits except for globalization issues. However, TIGTA did complete an 

audit of globalization issues in fiscal year 2011,18F

19 and had five ongoing 

 

19Treasury Inspector General for Tax Administration, The 2009 Offshore Voluntary 

Disclosure Initiative Increased Taxpayer Compliance, but Some Improvements Are 

Needed, 2011-30-118 (Washington, D.C.: September 2011).
Page 14 GAO-14-70 TIGTA Audit Quality 

audits related to these issues during fiscal year 2012.19F

20 In addition, TIGTA 

planned to address additional globalization issues in eight audits included 

in the fiscal year 2013 annual audit plan.

TIGTA’s audit policies and procedures were consistent with selected 

requirements of Government Auditing Standards that we determined are 

most likely to have a direct bearing on the quality of the audit 

documentation used to support the findings, conclusions, and 

recommendations in audit reports, as well as requirements for 

independence and quality control and assurance. Also, our review of a 

random, nongeneralizable sample of 20 TIGTA audit reports issued in 

fiscal year 2012 found that they were generally consistent with 

Government Auditing Standards and TIGTA’s policies and procedures, 

with some exceptions. (See app. II for a listing of the sampled audit 

reports.) Specifically, while the sampled audits were consistent with the 

requirements of Government Auditing Standards for documented 

supervisory review, not all of these sampled audits fully met TIGTA’s 

policy for the timely documentation of supervisory sign-off. Also, two audit 

reports had specific statements that were not fully supported by sufficient, 

documented evidence.

TIGTA’s body of audit work completed in fiscal year 2012 consisted of 

performance audits.20F

21 Government Auditing Standards define 

performance audits as audits that provide findings or conclusions based 

on an evaluation of sufficient, appropriate evidence against criteria. 

Performance audits provide objective analysis to assist management and 

those charged with governance and oversight in using the information to 

improve program performance and operations, reduce costs, facilitate 

decision making by parties with responsibility to oversee, initiate 

corrective action, and contribute to public accountability.

 

20Three of the five audits related to globalization were issued during fiscal year 2013: 

Treasury Inspector General for Tax Administration, Foreign Corporations Filing 

Compliance, 2013-30-111 (Washington, D.C.: September 2013); Processing of the 

Payments Made in Foreign Currencies, 2013-30-027 (Washington, D.C.: March 2013); 

and Impact of IRC Section 911 on International Tax Administration, 2013-30-112 

(Washington, D.C.: September 2013).

21IRS’s financial statements are audited annually by GAO. GAO, Financial Audit: IRS’s 

Fiscal Years 2012 and 2011 Financial Statements, GAO-13-120 (Washington, D.C.: 

Nov. 9, 2012), and Financial Audit: IRS’s Fiscal Years 2013 and 2012 Financial 

Statements, GAO-14-169 (Washington, D.C.: Dec. 12, 2013).

TIGTA’s Audit Policies 

and Sampled Reports 

Were Generally 

Consistent with 

Standards, but 

Additional Review 

Could Address 

Exceptions
Page 15 GAO-14-70 TIGTA Audit Quality 

Government Auditing Standards provide generally accepted government 

auditing standards for financial audits, performance audits, and 

attestation engagements—which can cover a broad range of objectives. 

These standards are principle based and intended to be general in nature 

and, as such, permit flexibility in developing and implementing policies 

and procedures for ensuring adherence with the standards. TIGTA’s 

Operations Manual provides policies and procedures for the audit staff to 

follow in order to perform their work consistent with professional auditing 

standards, including specific paragraphs from Government Auditing 

Standards, as well as guidance on these standards to help ensure 

compliance. Our review focused on selected requirements of the 

standards related to independence; quality control and assurance; audit 

planning; internal control; obtaining sufficient, appropriate evidence; data 

reliability; elements of a finding; documentation; reporting auditor’s 

compliance with auditing standards; and reporting views of responsible 

officials. For each requirement we reviewed, we found corresponding 

sections and guidance in TIGTA’s Operations Manual. In addition, for 

each sampled audit we were able to identify the extent of the documented 

support for each of the selected requirements as well as the actions taken 

by TIGTA to help ensure compliance with Government Auditing 

Standards.

Government Auditing Standards require that in all matters relating to the 

audit work, the audit organization and the individual auditor, whether 

government or public, must be independent.21F

22 TIGTA’s Operations 

Manual cites this specific requirement and states that if TIGTA is to be 

effective, it must be independent and its opinions, conclusions, 

judgments, and recommendations must be viewed as being impartial by 

knowledgeable third parties. TIGTA’s policy requires compliance with the 

conceptual framework approach to independence as contained in 

Government Auditing Standards. One of TIGTA’s specific procedures to 

help ensure independence requires each professional staff member to 

acknowledge his or her responsibility to report any current or future 

independence impediment by annually completing the Office of Audit’s 

Personal Impairment Form. We confirmed that each TIGTA staff member 

required to do so had signed the form in fiscal year 2012 acknowledging 

responsibility to report any independence impairments regarding audits of 

IRS, which was consistent with auditing standards and TIGTA’s policies 

and procedures.

 

22Government Auditing Standards, 3.02 and 3.59.

Independence
Page 16 GAO-14-70 TIGTA Audit Quality 

Quality control and assurance standards require an audit organization to 

establish and maintain a system of quality control that is designed to 

provide reasonable assurance that the organization and its personnel 

comply with professional standards and applicable legal and regulatory 

requirements, and have an external peer review performed by reviewers 

independent of the audit organization at least once every 3 years.2F

23

TIGTA’s Operations Manual requires timely supervisory review of audit 

documentation to help ensure compliance with auditing standards, 

internal quality assurance reviews of each TIGTA business unit every 

3 years, and an external peer review of TIGTA’s audit operations every 

3 years by another federal OIG.

Based on our review of 20 sampled reports, all had documented 

supervision consistent with auditing standards. However, not all audit 

documentation supported that supervisory review had occurred within 

30 days of completion of the audit documents as required by TIGTA’s 

Operations Manual. Specifically, 9 of the 20 reports had a total of 86 audit 

documents with supervisory review documented after the 30-day 

requirement. Nevertheless, all the audit documentation indicated that 

supervisory review occurred prior to the report issue date.23F

24 Exceptions to 

TIGTA’s policy on the timeliness of documented supervisory review of 

audit documentation had been previously identified by TIGTA’s internal 

quality assurance reviews and the most recent peer review performed by 

another IG office.

TIGTA completed four internal quality assurance reviews during fiscal 

years 2011 and 2012 that covered all four of the business units in the 

Office of Audit to determine each unit’s level of compliance with 

professional standards. Each report concluded that the audit activities 

were conducted in compliance with auditing standards but had 

recommendations to strengthen adherence to TIGTA’s policies and 

procedures. Specifically, all four reviews made recommendations for 

more timely documentation of supervisory review within the time frames 

provided by TIGTA’s audit policies and procedures. The corrective 

actions by each business unit varied from emphasizing better 

 

23Government Auditing Standards, 3.82-3.107.

24The 86 audit documents with documented supervisory review after the 30-day TIGTA 

requirement represented about 1 percent of the audit documents we reviewed. Also, of the 

86, only 4 were used as an index to support information in the final audit reports.

Quality Control and 

Assurance
Page 17 GAO-14-70 TIGTA Audit Quality 

implementation of TIGTA’s policies and procedures through 

memorandums, to certification by audit supervisors of their review and 

quality checklists to help ensure that the audit documentation adheres to 

office guidance.

In addition, the General Services Administration Office of Inspector 

General (GSA OIG) performed a peer review of TIGTA’s audit quality for 

the year ended March 31, 2012, and issued its report—with a rating of 

pass—on September 25, 2012.24F

25 The GSA OIG reported that four audits 

contained 322 instances where the audit documentation had documented 

supervisory review in a time frame beyond the 30-calendar-day review 

requirement in TIGTA’s policies and procedures. The GSA OIG 

recommended that TIGTA reinforce the importance of timely preparation 

and review of audit documentation supporting the audit in conformance 

with its stated policy. TIGTA agreed with the recommendation and added 

to the corrective actions already taken to address the recommendations 

from TIGTA’s internal quality assurance reviews mentioned above. 

TIGTA’s continued actions to address the peer review recommendation, if 

effectively implemented, should help to ensure that audit documentation 

will receive the required timely documentation of supervision in 

accordance with its stated supervisory review policy.

Auditing standards require a written audit plan for each audit. The form 

and content of the written audit plan may vary among audits and may 

include an audit strategy, audit program, project plan, or other appropriate 

documentation of key decisions about the audit objectives, scope, and 

methodology and the auditor’s basis for those decisions.25F

26 TIGTA’s 

Operations Manual also requires that audit plans be documented and 

include the objectives, scope, and methodology. For the 20 TIGTA audits 

included in our review, the documented audit plans were located in the 

audit documentation and addressed the objectives, scope, and 

methodology for each audit.

Auditing standards on internal control require auditors to obtain an 

understanding of internal controls that are significant within the context of 

 

25Peer reviews of IG audit operations allow for three types of ratings: (1) pass, (2) pass 

with deficiencies, and (3) fail.

26Government Auditing Standards, 6.06-6.52.

Audit Planning

Internal Control
Page 18 GAO-14-70 TIGTA Audit Quality 

the audit objectives.26F

27 TIGTA’s Operations Manual includes guidance to 

auditors that when evaluating internal controls, significant weaknesses 

found are to be considered deficiencies and identified in the audit report. 

In addition, controls that were reviewed should be identified to the extent 

necessary to clearly present the objectives, scope, and methodology of 

the audit. Our review of the 20 TIGTA audit reports found that each report 

identified the internal controls significant to the objectives of the audit and 

any weaknesses identified.

The fieldwork standards for performance audits require auditors to obtain 

sufficient, appropriate evidence to provide a reasonable basis for their 

findings and conclusions. In addition, the reporting standards state that 

auditors should describe in their report limitations or uncertainties with the 

reliability or validity of evidence if significant to the findings and 

conclusions, and if such disclosure is necessary to avoid misleading the 

report users.27F

28 Both auditing standards and TIGTA’s Operations Manual 

state that auditors should plan for sufficient, appropriate evidence to 

achieve the objectives of the audit. In addition, both state that auditors 

should perform and document an overall assessment of collective 

evidence to support the findings and conclusions, and include the results 

of any specific assessment to conclude on the validity and reliability of 

specific evidence. Also, both auditing standards and TIGTA’s policies 

state that when reporting the scope of the audit, auditors should describe 

the audit work conducted to accomplish the audit objectives and should 

report any significant constraints imposed on the audit by data limitations 

or scope impairments. TIGTA’s policies also encourage auditors to 

quantify the impact of reported issues and the magnitude of 

recommended corrective actions through outcome measures to the 

maximum extent possible.

Within our sample of TIGTA’s audit reports and the related audit 

documentation, TIGTA’s audits generally had sufficient and appropriate 

evidence to provide a reasonable basis for the reported findings, 

conclusions, and recommendations with the exception of two audit 

reports that had specific reported conclusions that were not consistent 

with requirements regarding evidence in Government Auditing Standards.

 

27Government Auditing Standards, 6.16-6.22.

28Government Auditing Standards, 6.56 and 7.15.

Obtaining Sufficient, 

Appropriate Evidence
Page 19 GAO-14-70 TIGTA Audit Quality 

In the first instance, a TIGTA report addressing the IRS process used to 

integrate new employees reported, among other issues, that the process 

could be improved if additional measures and analyses were included in 

IRS’s new employee questionnaire.28F

29 We found sufficient and appropriate 

evidence to support this conclusion. However, an additional statement in 

the report concluded that some organizations within IRS had 

implemented best practices to integrate new employees better than 

others. According to the report and supporting audit documentation, this 

conclusion was based on the results of a questionnaire that was sent to a 

judgmental sample of new employees in different IRS organizations. A 

judgmental sample is a nonstatistical sample, the results of which cannot 

be used to project to the population. According to TIGTA’s Operations 

Manual, these results cannot be projected or generalized to make such a 

conclusion. TIGTA officials stated that the report incorrectly stated that a 

judgmental sample was used when the sample was actually 

representative of the different IRS organizations and that the statement 

regarding their relative ability to implement best practices was 

appropriate. However, the audit documentation did not support that the 

sample was in fact representative of the population.

In the second report, TIGTA reported that approximately 1.5 million tax 

returns with refunds in excess of $5.2 billion for tax year 2010 had 

characteristics of prior tax returns found to be fraudulent because of 

identity theft.29F

30 TIGTA’s audit documentation provided sufficient evidence 

to support this conclusion. However, neither the report nor the audit 

documentation included sufficient evidence to fully support additional 

report conclusions that IRS (1) potentially issued $5.2 billion in fraudulent 

tax refunds because of identity theft, (2) could potentially issue about 

$21 billion in fraudulent tax refunds resulting from identity theft as 

adjusted by IRS’s efforts over the next 5 years to better eliminate 

fraudulent returns, and (3) could potentially save $21 billion in funds to be 

put to better use if TIGTA’s recommendations were implemented.

 

29Treasury Inspector General for Tax Administration, The Onboarding Process Has 

Improved, but Additional Steps Should Be Taken to Ensure Employees Have the Tools, 

Resources, and Knowledge to Be Successful and Productive, 2012-10-091 (Washington, 

D.C.: Aug. 6, 2012).

30Identity theft can occur when an individual uses another person’s name and Social 

Security number to file a fraudulent tax return to obtain a fraudulent tax refund.
Page 20 GAO-14-70 TIGTA Audit Quality 

TIGTA’s report and audit documentation did not provide information on 

the extent to which the identified tax returns with such characteristics can 

be expected to be fraudulent or the extent to which the possible fraud 

could be attributed to identity theft. The report did use “potential” to refer 

to the report conclusions regarding the extent of undetected identity theft, 

but did not describe why this was only potential or what factors may limit 

the full amount of identity theft from being known. Also, without knowing 

the extent to which fraud characteristics associated with prior tax returns 

can successfully predict future fraudulent tax returns because of identity 

theft, the reported potential amount of $21 billion resulting from identity 

theft cannot be reliably estimated. In addition, the report title—There Are 

Billions of Dollars in Undetected Tax Refund Fraud Resulting from Identity 

Theft—stated the reported information as a certainty while, as discussed 

above, the reported dollar amount of identity theft was not sufficiently 

supported by evidence. The report title, therefore, was inconsistent with 

the body of the report and could cause users of the report to assume that 

billions of dollars in undetected identity theft fraud had actually been 

identified.

In its semiannual report for the period, TIGTA reported the $21 billion 

amount as “funds to be put to better use.” This amount was then included 

in the total accumulated “funds to be put to better use” reported by all the 

federal IGs in CIGIE’s annual Progress Report to the President Fiscal 

Year 2012.30F

31 For fiscal year 2012, CIGIE reported approximately 

$62 billion in “funds to be put to better use,” which are potential cost 

savings resulting from efficiencies recommended by all the federal 

statutory IG offices. TIGTA’s reported amount of $21 billion made up 

about a third of this total.

TIGTA’s Operations Manual includes a required review process 

specifying review by TIGTA management and quality assurance officials 

directed at ensuring that the audit findings and conclusions are reported 

correctly. Both of the TIGTA reports we identified as not having sufficient 

evidence to fully support reported conclusions had followed TIGTA’s 

report review process. However, neither TIGTA’s review of these reports 

 

31CIGIE, as established by the IG Reform Act of 2008, replaced the duties and functions 

of the President’s Council on Integrity and Efficiency and the Executive Council on 

Integrity and Efficiency, which were originally established by executive orders. These 

duties include an obligation to report to the President on the activities of CIGIE. The 

chairpersons of CIGIE and the prior councils have met that obligation through the 

issuance of progress reports.
Page 21 GAO-14-70 TIGTA Audit Quality 

nor the Operations Manual included specific procedures for a detailed 

review of the draft audit reports by individuals trained and qualified to 

assess the validity and reliability of report statements, findings, and 

conclusions derived from statistical and other related data analyses. Such 

individuals could help to ensure that the results are properly reported, 

including any limitations or uncertainties, and report statements are fully 

supported by sufficient and documented evidence.

Auditing standards state that auditors should assess the sufficiency and 

appropriateness of computer-processed information regardless of 

whether this information is provided to auditors or auditors independently 

extract it. The assessment of the sufficiency and appropriateness of 

computer-processed information includes considerations regarding the 

completeness and accuracy of the data for the intended purposes.31F

32

TIGTA’s Operations Manual states that if computer-processed data are 

used or included in the audit report, the report must discuss the reliability 

of the data and report the scope and results of any assessment. The

Operations Manual also requires that the data sources and the methods 

used to determine data reliability be clearly stated in each report. Also, if 

data reliability could not be determined, or was not established to the 

extent normally desired, the report should contain a clear statement to 

that effect, including the impact on the audit results. Each of the 20 

TIGTA reports that we reviewed contained information on the extent of 

reliance on computer-processed data and a discussion of the reliability of 

the data.

Auditing standards state that auditors should plan and perform 

procedures to develop the elements of a finding necessary to address the 

audit objectives. In addition, if auditors are able to sufficiently develop the 

elements of a finding, they should develop recommendations for 

corrective action if they are significant within the context of the audit 

objectives.32F

33 TIGTA’s Operations Manual also requires that all elements 

of a finding be fully developed and documented. These include the 

criteria, condition, cause, and effect. In our review of the sample of 20 

TIGTA audits we were able to identify the elements of each finding in both 

the final audit reports and the audit documentation. In addition, TIGTA 

 

32Government Auditing Standards, 6.66.

33Government Auditing Standards, 6.37-6.77.

Data Reliability

Elements of a Finding
Page 22 GAO-14-70 TIGTA Audit Quality 

made recommendations in each audit report where findings were 

developed.

Auditing standards require auditors to prepare documentation related to 

planning, conducting, and reporting for each audit. In addition, auditors 

should prepare audit documentation in sufficient detail to enable an 

experienced auditor, having no previous connection to the audit, to 

understand from the audit documentation the nature, timing, extent, and 

results of audit procedures performed, the audit evidence obtained and its 

source and the conclusions reached, including evidence that supports the 

auditors’ significant judgments and conclusions.3F

34 TIGTA’s Operations 

Manual requires the preparation of orderly records that support the audit 

process from planning to the issuance of documents. These records are 

to include, but are not limited to, evidence that supports the adequacy of 

review and development of findings resulting from audit testing. With the 

exception of the two TIGTA reports that did not provide audit 

documentation that was consistent with auditing standards as discussed 

earlier, we found that the audit reports in our sample had adequate 

documentation to support the reported findings, conclusions, and 

recommendations.

Auditing standards state that when auditors comply with the requirements 

of all applicable audit standards, they should include an unmodified 

compliance statement in the audit report to indicate that they performed 

the audit in accordance with standards.34F

35 TIGTA’s Operations Manual

also requires that a statement that the audit was conducted in accordance 

with generally accepted government auditing standards be included in the 

report. Each audit report in our sample included the required compliance 

statement.

Auditing standards state that auditors should obtain and report the views 

of responsible officials of the audited entity concerning the findings, 

conclusions, and recommendations included in the audit report as well as

any planned corrective actions.35F

36 TIGTA’s Operations Manual requires 

auditors to include the views of the auditee concerning the findings, 

 

34Government Auditing Standards, 6.79-6.85.

35Government Auditing Standards, 7.30-7.31.

36Government Auditing Standards, 7.32-7.38.

Documentation

Reporting Auditor’s 

Compliance with Auditing 

Standards

Reporting Views of 

Responsible Officials
Page 23 GAO-14-70 TIGTA Audit Quality 

conclusions, recommendations, and corrective actions in the report. In 

addition, TIGTA requires a synopsis of the management response as well 

as a complete copy of management’s response to the draft report in all 

final reports where appropriate. Each audit report in our sample of 20 

TIGTA audits included the complete comments of the responsible officials 

for each unit, office, or program audited when provided. In addition, where 

TIGTA’s audits had findings with recommendations, a synopsis of the 

responsible officials’ comments and recognition of improvements made to 

address any corrective actions were included in the reports.

TIGTA maintained a planning process that provided audit coverage of 

IRS’s major programs and activities, high-risk areas, and management 

challenges. In addition, TIGTA’s audit policies and procedures were 

consistent with the provisions of auditing standards we reviewed, and a 

random, nongeneralizable sample of TIGTA audit reports were generally 

consistent with these standards and TIGTA’s policies as provided by its 

Operations Manual. However, even though TIGTA’s documentation of 

supervisory review was consistent with auditing standards, it was not 

always in compliance with its own timeliness requirements. TIGTA was in 

the process of taking several corrective actions in this area based on 

similar findings from its internal review process as well as 

recommendations from an external peer reviewer that if implemented 

properly should help to correct the identified weaknesses. We also 

identified two audits where the documented evidence did not fully support 

reported conclusions. TIGTA’s final review of these two audit reports did 

not include an expert in the use of statistics and related data analyses, 

and TIGTA’s Operations Manual does not require such a review. 

Including an expert in statistics and related data analyses during the 

quality review process for draft audit reports could help ensure that all 

reported conclusions are accurately reported and fully supported by 

sufficient and documented evidence as required by auditing standards.

To help ensure that audit report conclusions are reported correctly and 

supported by sufficient evidence, we recommend that the Treasury 

Inspector General for Tax Administration develop and implement policies

and procedures requiring a detailed review of draft audit reports by 

individuals trained and qualified to assess the statistical and related data 

analyses used to support the reported findings and conclusions.

Conclusions

Recommendation for 

Executive Action
Page 24 GAO-14-70 TIGTA Audit Quality 

In comments on a draft of this report, the TIGTA Inspector General 

concurred with our recommendation and agreed to develop policies to 

provide guidance on the circumstances in which a statistician should be 

consulted. The Inspector General plans to develop and implement this 

guidance to include a review of the presentation of information in draft 

reports based on sampling or other statistical methods, depending on the 

complexity. We believe this emphasis on additional policies is responsive 

to our recommendation.

The Inspector General disagreed with our conclusion that TIGTA’s audit 

report on identity theft and related audit documentation did not fully 

support the reported potential amount of tax refunds over 5 years 

because of identity theft as well as the reported $21 billion in potential 

cost savings that could result from the audit recommendation. In addition, 

the Inspector General stated that we did not raise any concerns or have 

any substantive discussions with TIGTA regarding the extensive analysis 

that TIGTA performed to ensure that the tax returns identified had a high 

likelihood of fraud involving identity theft until after the conclusion of our 

fieldwork. 

Based on our review of the audit documentation for TIGTA’s report, we 

agree that TIGTA performed an extensive analysis to identity tax returns 

that had the characteristics of prior identity theft frauds. In addition, our 

report states that TIGTA’s audit documentation provided sufficient 

evidence to support the number and dollar amount of tax returns with 

characteristics of prior tax returns found to be fraudulent because of 

identity theft. Consequently, TIGTA’s analysis to identify tax returns with 

such characteristics required little discussion. However, while the audit 

documentation supported a conclusion that the tax returns identified by 

TIGTA had these characteristics, we had extensive discussions with 

TIGTA’s audit staff throughout our review regarding the lack of audit 

documentation to support (1) the extent that the identified tax returns with 

such characteristics can be expected to be fraudulent, (2) the extent that 

the possible fraud could be attributed to identity theft, and (3) that the tax 

returns with such characteristics could result in a potential savings of 

approximately $21 billion in funds to be put to better use if the report’s 

recommendations were implemented. Neither our discussions with the 

audit staff nor the Inspector General’s comments to our draft report 

provided additional information to fully support these reported 

conclusions. Therefore, we continue to believe that TIGTA lacked

sufficient evidence to fully support these statements, and we reaffirm our 

findings and conclusions.

Agency Comments

and Our Evaluation
Page 25 GAO-14-70 TIGTA Audit Quality 

As agreed with your office, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time we will send copies to the Secretary of the 

Treasury, the Commissioner of the IRS, the Treasury Inspector General 

for Tax Administration, the OMB Deputy for Management, other 

congressional committees, and interested parties. In addition, this report 

will be available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact 

me at (202) 512-2623 or davisbh@gao.gov. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last 

page of this report. GAO staff who made key contributions to this report 

are listed in appendix IV.

Sincerely yours,

Beryl H. Davis

Director

Financial Management and Assurance
Appendix I: Scope and Methodology

Page 26 GAO-14-70 TIGTA Audit Quality 

To review the Treasury Inspector General for Tax Administration’s 

(TIGTA) planning process, we obtained the guidance on planning in the 

Quality Standards for Federal Offices of Inspector General, October 2003, 

established by the Council of the Inspectors General on Integrity and 

Efficiency. We identified the planning guidance for inspectors general (IG) 

offices related to risk assessment and coordination and compared these 

requirements to TIGTA’s strategic plan for fiscal years 2009 through 2014 

and annual audit plan for fiscal year 2012. To determine the extent of 

audit coverage, we reviewed the titles and objectives of all audit reports 

issued by TIGTA during 2012 and compared them to the divisions and 

offices responsible for the Internal Revenue Service’s major programs 

and activities as identified in TIGTA’s Operations Manual, high-risk areas 

identified by GAO for the period covering fiscal year 2012, and 

management challenges identified by TIGTA for fiscal year 2012 as 

reported in semiannual reports to the Congress.

To determine whether TIGTA’s audit policies and procedures as provided 

in its Operations Manual were consistent with requirements in 

Government Auditing Standards, we focused on those standards that are 

most likely to have a direct bearing on the quality of the audit 

documentation used to support the conclusions, findings, and 

recommendations in audit reports. Specifically, we selected for our review 

the following general, fieldwork, and reporting standards for performance 

audits: independence; quality control and assurance; planning; internal 

control; obtaining sufficient, appropriate evidence; data reliability; 

elements of a finding; documentation; statement of compliance with 

standards; and obtaining views of officials. We compared the selected 

requirements of these standards with the policies and procedures 

contained in TIGTA’s Operations Manual.

To determine whether TIGTA’s audits were consistent with the policies 

and procedures in its Operations Manual and with selected provisions of 

Government Auditing Standards, we reviewed a random, 

nongeneralizable sample of 20 audits from the total of 94 audits issued by 

TIGTA’s four business units in its Office of Audits during fiscal year 2012 

(see app. II). The overall sample included audit reports from each of 

TIGTA’s four business units with a random sample of 5 audits from each 

unit. For each sampled audit report, we compared the selected 

requirements of Government Auditing Standards and TIGTA’s Operations 

Manual with the information in the audit report and in the related audit 

documentation for each sampled audit. This included the supporting audit 

documentation for the report findings, conclusions, and recommendations 

and the criteria, condition, cause, and effect in each sampled audit report. 

Appendix I: Scope and Methodology
Appendix I: Scope and Methodology

Page 27 GAO-14-70 TIGTA Audit Quality 

In addition, for the independence standard we reviewed TIGTA’s policies 

and procedures for documenting the assertion of independence by each 

auditor and obtained the documented assertions for fiscal year 2012, 

which is the most recently completed full year of audit activity for our 

review. For the quality control and assurance standard, in addition to a 

review of the audit documentation, we obtained an understanding of the 

information in the internal quality review reports completed by TIGTA of 

its own audit operations and the external peer review completed by 

another IG office. In addition, we obtained an understanding of the 

process used by TIGTA to review the quality of draft audit reports before 

they are issued.
Appendix II: Sample of 20 Audit Reports 

Issued by TIGTA in Fiscal Year 2012 Selected 

for Review

Page 28 GAO-14-70 TIGTA Audit Quality 

Appendix II: Sample of 20 Audit Reports 

Issued by TIGTA in Fiscal Year 2012 

Selected for Review

Treasury Inspector General for Tax Administration. Eliminating the Automatic Mailing of 

Tax Packages Achieved Significant Savings, Although Some Taxpayers Were Burdened. 

2012-40-008. Washington, D.C.: December 13, 2011.

Treasury Inspector General for Tax Administration. Procedures Need to Be Updated to 

Ensure Proper Determinations of Tax Relief for Taxpayers Affected by Disasters.

2012-40-015. Washington, D.C.: February 16, 2012.

Treasury Inspector General for Tax Administration. Improvements Are Needed to Ensure 

the Business Master File Case Creation Nonfiler Identification Process Is Working 

Effectively. 2012-30-020. Washington, D.C.: February 17, 2012.

Treasury Inspector General for Tax Administration. Citibank Purchase Card and Fleet 

Card Rebates Were Maximized and Are Now Properly Allocated. 2012-10-031. 

Washington, D.C.: March 30, 2012.

Treasury Inspector General for Tax Administration. Disaster Recovery Testing Is Being 

Adequately Performed, but Problem Reporting and Tracking Can Be Improved. 

2012-20-041. Washington, D.C.: May 3, 2012.

Treasury Inspector General for Tax Administration. The Exempt Organizations Function 

Should Take Action to Limit the Disclosure of Social Security Numbers on Publicly 

Available Tax-Exempt Returns. 2012-10-046. Washington, D.C.: May 4, 2012.

Treasury Inspector General for Tax Administration. Customer Account Data Engine 2 

Performance and Capacity Is Sufficient, but Actions Are Needed to Improve Testing. 

2012-20-051. Washington, D.C.: May 16, 2012.

Treasury Inspector General for Tax Administration. The Remediation Plan Still Does Not 

Contain All the Necessary Actions to Address the Unpaid Assessments Material 

Weakness. 2012-10-069. Washington, D.C.: July 19, 2012.

Treasury Inspector General for Tax Administration. There Are Billions of Dollars in 

Undetected Tax Refund Fraud Resulting From Identity Theft. 2012-42-080. Washington, 

D.C.: July 19, 2012.

Treasury Inspector General for Tax Administration. Ensuring the Quality Review Process 

Is Consistently Followed Remains a Problem for the Volunteer Program. 2012-40-088. 

Washington, D.C.: July 27, 2012.

Treasury Inspector General for Tax Administration. The Onboarding Process Has 

Improved, but Additional Steps Should Be Taken to Ensure Employees Have the Tools, 

Resources, and Knowledge to Be Successful and Productive. 2012-10-091. Washington, 

D.C.: August 6, 2012.

Treasury Inspector General for Tax Administration. Fiscal Year 2012 Statutory Review of 

Compliance With Legal Guidelines When Issuing Levies. 2012-30-095. Washington, D.C.: 

August 17, 2012.

Treasury Inspector General for Tax Administration. Procedures for Withdrawals and 

Releases of Notices of Federal Tax Lien Were Not Always Followed. 2012-30-096. 

Washington, D.C.: August 22, 2012.

Treasury Inspector General for Tax Administration. Fiscal Year 2012 Statutory Review of 

Restrictions on Directly Contacting Taxpayers. 2012-30-089. Washington, D.C.: 

September 4, 2012.

Treasury Inspector General for Tax Administration. Fiscal Year 2012 Statutory Audit of 

Compliance With Notifying Taxpayers of Their Rights When Requested to Extend the 

Assessment Statute. 2012-30-102. Washington, D.C.: September 4, 2012.

Treasury Inspector General for Tax Administration. The Process for Individuals to Report 

Suspected Tax Law Violations Is Not Efficient or Effective. 2012-40-106. Washington, 

D.C.: September 10, 2012.
Appendix II: Sample of 20 Audit Reports 

Issued by TIGTA in Fiscal Year 2012 Selected 

for Review

Page 29 GAO-14-70 TIGTA Audit Quality 

Treasury Inspector General for Tax Administration. Deficiencies Continue to Exist in 

Verifying Contractor Labor Charges Prior to Payment. 2012-11-101. Washington, D.C.: 

September 19, 2012.

Treasury Inspector General for Tax Administration. Despite Steps Taken to Increase 

Electronic Returns, Unresolved Modernized e-File System Risks Will Delay the 

Retirement of the Legacy e-File System and Implementation of Business Forms.

2012-20-121. Washington, D.C.: September 27, 2012.

Treasury Inspector General for Tax Administration. Treasury Inspector General for Tax 

Administration - Federal Information Security Management Act Report for Fiscal Year 

2012. 2012-20-114. Washington, D.C.: September 28, 2012.

Treasury Inspector General for Tax Administration. Annual Assessment of the Internal 

Revenue Service Information Technology Program. 2012-20-120. Washington, D.C.: 

September 28, 2012.
Appendix III: Comments from the Treasury 

Inspector General for Tax Administration

Page 30 GAO-14-70 TIGTA Audit Quality 

Appendix III: Comments from the Treasury

Inspector General for Tax Administration
Appendix III: Comments from the Treasury 

Inspector General for Tax Administration

Page 31 GAO-14-70 TIGTA Audit Quality 
Appendix III: Comments from the Treasury 

Inspector General for Tax Administration

Page 32 GAO-14-70 TIGTA Audit Quality 
Appendix III: Comments from the Treasury 

Inspector General for Tax Administration

Page 33 GAO-14-70 TIGTA Audit Quality 
Appendix IV: GAO Contact and Staff 

Acknowledgments

Page 34 GAO-14-70 TIGTA Audit Quality 

Beryl H. Davis, (202) 512-2623 or davisbh@gao.gov

In addition to the contact named above, Jackson Hufnagle (Assistant 

Director), Carl Barden, Jacquelyn Hamilton, Wilfred Holloway, Taya 

Tasse, and Clarence Whitt made key contributions to this report.

Appendix IV: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(197235)
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